Currently consumers who wish to use their credit or debit accounts must use a physical credit card or debit card and/or provide sensitive financial and personal data to a third party to initiate and complete the transaction. The consumer's account number and consumer credit card number are identical and are visible for theft by third parties or employees of third party merchants or financial institutions. As used herein, the term “card” will include both credit cards and debit cards.
Presently cards are constructed from plastic or polyvinyl chloride and contain a magnetic stripe on the back of the card. The cardholder's name is embossed on the front of the card along with the card's expiration date and the actual credit card number. The back of the card contains the magnetic stripe, a signature line, information on how to contact the card issuer and, possibly, the card number printed along with a three or four digit card verification number. The magnetic stripe may store up to three tracks of information, tracks one and two are typically read-only magnetic tracks, and track three is a read/write magnetic stripe. Tracks one and two have standard formatting as specified in the standard ISO/IEC 7813. Track three is formatted according to the standard ISO/IEC 4909.
Track one includes the information that is embossed on the front of the card, the account number, the cardholder's name and the expiration date of the card along with additional information such as the three digit service code (the first digit specifies the type of exchange permitted, the second digit specifies the authorization process required, and the third digit indicates the type of services available to the card), the country code possibly depending on the card number, and discretionary data. A check digit is included at the end of the first track as a verification of the data on track one.
Track two includes the same information as track one, excluding the cardholder's name and the discretionary data that is proprietary to the card issuer.
Track three includes the account number, sometimes the country code, and the card expiration date. Additionally track three may include up to two additional, subsidiary account numbers that may provide fallback authorization in case authorization is refused with the primary account. Track three has fields that may be updated, or written to by certain types of point of sale terminals. Track three thus offers the possibility of storing and updating financial parameters that control the cardholder's spending, or for control uses by the issuer.
Using the existing card methodology of having the same number for both the consumer account number and the consumer credit card number means that, in order to track a sales transaction, the merchant must store the consumer's credit card number. Recently there have been numerous publicized occurrences of merchants' consumer relationship management systems having been hacked by cyber thieves who have stolen consumer's credit card data. This potential for theft from the merchant increases the security risk, and liability, to both the consumer cardholder and the merchant.
In the case of a purchase that is completed verbally over a cell phone, fixed based telephone, IP phone or other means of verbal communication the consumer must orally relay his or her personal information in order to complete the purchase transaction. Transactions conducted over the Internet require the consumer to input the same information as required for a verbal order, which exposes the consumer to the possibility of the theft of the consumer's credit or debit card information and the consumer's personal data. Transactions where the card holder is not physically present are known as “card not present” or mail order/telephone order transactions. These types of transactions also include transactions that are conducted over the Internet.
Card Verification Value which is also known as CVC2 or Card Identification Number (CID) has been in use for over ten years. The system is basically a 3 digit or 4 digit number printed on the credit card separate from the actual credit card number and is not on the magnetic stripe. The merchant, whether via the Internet or telephone, asks for the number at the same time the card number is provided to the merchant. This number is then passed along to the verifying institution, which confirms that the card is in the presence of the cardholder. This method is subject to fraud, such as in the case of a criminal obtaining the credit card number may just as easily copy the verification number. When cards are swiped and thus stolen electronically then the verification number is copied at the time of the swiping and provided to whomever the card number is sold.
MasterCard's recent security enhancement, in response to consumer demand for greater security and privacy in card not present transactions, implemented a system MasterCard named “MasterCard SecureCode”. This system requires that the consumer, in an Internet transaction, input a private code (that has been given to the consumer by the bank that issued the card) into a “pop-up” screen that appears on the merchant's web page when the consumer has notified the web page that the consumer has completed the order. The consumer then inputs his/her private code and the authentication value is then passed along to the issuing bank in the merchant's normal authorization process. Using the MasterCard SecureCode system thus eliminates the possibility of “one click” purchasing, requires that the merchant install a SecureCode compliant “plug-in” application on the merchant's web site, and still provides the merchant with the consumer's credit card and other personal data. This method, while improving security over the previously existing system, is cumbersome and does not accomplish the objective of keeping the consumer's card number and personal information hidden from the merchant and improve ease of use by the cardholder. This method does not allow for notification to the consumer of the purchase, nor does it add security or ease of use to transactions conducted verbally using a cell phone or land based telephone.
Visa's recent security solution is called “Verified by Visa” and using Three Domain security (3D or 3D-Secure), which operates by the cardholder inputting a personal identification number (PIN) into the merchant's web site when requested. This solution does not work on telephone sales (as the PIN would have to be verbally given to the merchant's call center employee) and is cumbersome to operate on the Internet.
The Verified by Visa process works in the following steps in an Internet transaction:                1. The cardholder enters payment details using the merchant's web page.        2. The cardholder is automatically directed to the card issuer's server, who generates a pop-up screen on the consumer's computer.        3. The issuer authenticates the cardholder via the cardholder inputting his/her PIN number of password.        4. The issuer then transmits to the cardholder a digitally signed approval, which is then retransmitted to the merchant's server to begin the normal credit approval process.        
The normal credit approval process begins after the authentication process in order for the digital authorization from Visa to be included with the authorization request from the Merchant to Visa or, more likely, the authorization service for the card issuer.
Verified by Visa requires that the cardholder send the purchase authorization request from the consumer's computer to the merchant, who then sends the request to Visa's server, who then sends the request to the issuer's server. The issuer's server prompts for the password from the consumer, who then inputs the password or PIN, sends it to the issuer's server who then sends it to their (the issuer's) authentication server. The issuer's server then sends the approval to the consumer's computer who then passes the approval to the merchant's server. Then the merchant processes the payment for approval in the normal approval process and includes the authentication data along with the approval request to the card issuer for credit approval. Verified by Visa is cumbersome and will not work on telephone orders, and offers little compensation to consumers while taking more time to complete the transaction. Verified by Visa does not add the functionality of auto-filling forms on the Internet Merchant (or other merchants') customer relationship management systems, allow “one-click purchasing’, ties up Visa, the merchant and the authorization entity's servers, increases communications between all of these servers, thus increasing the possibility of a communications error or drop, and still exposes the cardholder's data to theft.
Surrogate Card Numbers have been tried by American Express (Private Payments) and by MBNA (ShopSafe). The surrogate card number is basically a system where the consumer uses a software application to generate a one-time use credit card number that has a short validity period (normally two months or less) and a fixed charge value. The surrogate card number is tied to the consumer's “real” card number. This method is cumbersome (the consumer has to obtain the surrogate number and then keep track of it) and prevents the use of one click purchasing. Besides these issues, if surrogate numbers become widespread then, based on the current length of a credit card number (16 digits normally) there would soon be a shortage of numbers available. Of the 16 digits only 10 are available for actual account numbers as the other numbers designate the type of card, etc.
None of the above existing methods provide a solution that incorporates additional layers of security for both verbal and Internet transactions. Nor do any of the existing methods solve the combined problems of security, ease of use, and allow for one-click” purchasing. Nor do any of the existing methods improve the accuracy and speed of the remote sales type, mail order/telephone order, transaction. Several of the above methods require additional hardware to implement and many increase the volume of communications (and thus the possibility for information theft and communications break down).
Other proposed solutions require additional equipment, require that the transaction data be handled differently by either the consumer, the merchant or the financial institution and do not provide the increased security or speed of the sales transaction required by consumers.
Thus there exists a need for either a physical or virtual method of securing and enhancing credit and debit transactions, whether the transaction is conducted in person, on the Internet, over the telephone or via other communications methods available to the consumer.